Client Advisory & Consultation Flashcards

A borrower is applying for a USDA Rural Development loan. What geographic eligibility factor must the underwriter discuss with the client?

Answer: The property must be in an eligible rural or suburban area as defined by USDA eligibility maps

USDA loans are restricted to properties in areas designated as rural or eligible suburban communities on the USDA's eligibility map.

When advising a client who has recently changed jobs, which scenario would be LEAST likely to raise an underwriting concern?

Answer: Changing employers within the same field for a higher salary three months prior to application

Lateral or upward moves within the same industry are typically viewed favorably, while career changes, self-employment transitions, or commission-only roles require more scrutiny.

A borrower wants to know why a property appraisal came in below the purchase price. Which advisory explanation is most appropriate?

Answer: The appraiser independently assessed market value based on comparable sales, which may differ from the negotiated price; the borrower can renegotiate, dispute the appraisal, or make up the difference

Appraisers use comparable market data independently of the purchase contract, and a gap between appraised value and purchase price gives the borrower several resolution options.

Under the Gramm-Leach-Bliley Act, what must lenders provide to mortgage clients regarding their personal financial information?

Answer: An annual privacy notice explaining what information is collected and how it is shared, with opt-out rights

GLBA requires financial institutions to provide annual privacy notices and give consumers the right to opt out of certain information sharing with non-affiliated third parties.

A borrower asks how an underwriter determines whether to use base salary or total compensation (including bonuses and overtime) for income qualification. What is the most accurate explanation?

Answer: Bonus and overtime income can be included if it has been consistently received for two years and is likely to continue, as documented by employer verification

Variable income like bonuses and overtime requires a two-year history of receipt, documentation from the employer, and a reasonable expectation of continuation.

When counseling a borrower about escrow accounts, which statement accurately describes how property taxes and insurance are handled?

Answer: The lender collects monthly contributions for taxes and insurance, holds them in escrow, and pays the bills on the borrower's behalf when due

Escrow accounts allow lenders to collect and disburse property tax and insurance payments, reducing default risk by ensuring these obligations are met.

A client asks whether they can remove a co-borrower from the loan after closing. What should the underwriter advise?

Answer: Removing a co-borrower typically requires refinancing the loan to qualify without them, as the original note cannot simply be amended

Since the co-borrower is legally obligated on the promissory note, removing them generally requires a refinance where the remaining borrower qualifies independently.